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The Scotsman: Earlier this month, BP shut down the eastern half of Prudhoe Bay

BP may face charges over Prudhoe Bay

BP LOOKS set to be taken to court by the Alaskan authorities, after they raised the possibility of both criminal and civil action against the British oil giant over the closure of Prudhoe Bay, America’s largest oil field.

The state’s attorney-general, David Márquez, said yesterday he has created a task force in the Department of Law to review the state’s legal rights, “particularly the full extent to which BP and possibly other parties can be held legally responsible for losses incurred by the state”.

He said: “Our message is simple. A thorough fact-finding investigation of BP’s management of the North Slope oil field is taking place.

“After the investigation is complete, appropriate legal action will be taken to protect Alaska’s interests.”

He added that potential legal options, “depending upon the results of the factual and legal investigation”, could include “criminal liability for criminally negligent conduct resulting in an oil spill and civil penalties for the full amount of actual damages for discharging petroleum on state land”.

Last week Márquez issued subpoenas to BP and Prudhoe co-owners – ConocoPhillips and Exxon Mobil – ordering them to preserve any documents that may be relevant to his investigation of the Prudhoe spill and closure.

Earlier this month, BP shut down the eastern half of Prudhoe Bay, the source of 8 per cent of the United States’ oil production, after a government-ordered inspection discovered serious pipe corrosion. BP is now replacing 16 miles of Alaskan pipeline at a cost of about $170 million (£89m). It had initially considered a full closure of the field.

BP has denied suggestions that it manipulated inspection data to avoid replacing the corroded Alaskan oil pipelines, insisting it discovered “unexpectedly severe corrosion” on the pipelines only after regulators asked it to carry out major monitoring tests in March.

The oil company has rejected any suggestion of wrongdoing, though it would not say whether the allegations had been investigated internally.

A spokesman said: “This would be against all our codes of conduct – business, ethical or otherwise.”

On Friday BP said it had lifted production at the field by 70,000 barrels a day to about 220,000, about half normal operating levels.

Alaska’s governor, Frank Murkowski, has accused BP of misleading regulators over the condition of its pipelines, and some BP shareholders have started legal action, accusing the firm of hiding the problems.

• Shares in BP yesterday extended Friday’s gains, up a further 5p to 619p after Goldman Sachs upgraded them to “neutral” from “sell”, citing valuation grounds after a recent bout of underperformance in the shares.

The US broker sees just 9 per cent potential upside to its price target of 665p, following the recent negative news surrounding the damaged pipeline. Goldman also said there remains more upside in Royal Dutch Shell, which it kept as a “buy”.

Scottish oil output climbs
THE value of oil and gas production from fields in Scottish waters in 2005 was £19.4 billion, up from £15.5bn the previous year, and accounted for 82.9 per cent of the total fields in the UK continental shelf, according to figures released by Inverness-based Mackay Consultants.

Oil production fell by 11.2 per cent in 2005 and gas by 8.3 per cent, but its value rose by 23.7 per cent.

Tony Mackay said the oil and gas industry accounted for 19.6 per cent of Scottish economic output during the year, against 16.5 per cent the previous year, mainly because of rising prices. “It is difficult to see oil and gas prices remaining so high,” he said.

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